1. Battle of the Forms Contracts – Prof Merges Feb. 17, 2011

2. Mirror Image Rule What do you call a purported acceptance that varies the terms of the offer?

3. Mirror Image Rule What do you call a purported acceptance that varies the terms of the offer? A counter-offer

4. Mirror Image Rule What do you call a purported acceptance that varies the terms of the offer? A counter-offer What then is the acceptance?

5. K Formation PO Sales Acknowledgement Shipment of goods; payment Shipment/pmt = Acceptance; “last shot” rule

6. Typical Purchase Order Form

7. Finding the Terms of the Contracts Purchase Order (Buyer)

8. Finding the Terms of the Contract Purchase Order (Buyer) 1.Goods 2.Price 3.Quantity 4.Shipment Date

10. Finding the Terms of the Contracts Purchase Order (Buyer) 1.Goods 2.Price 3.Quantity 4.Shipment Date “Major Terms”

11. Sales Confirmation (Seller) 1.Goods 2.Price 3.Quantity 4.Shipment Date

12. Sales Confirmation (Seller) 1.Goods 2.Price 3.Quantity 4.Shipment Date Purchase Order (Buyer) 1.Goods 2.Price 3.Quantity 4.Shipment Date

13. Sales Confirmation (Seller) 1.Goods 2.Price 3.Quantity 4.Shipment Date Purchase Order (Buyer) 1.Goods 2.Price 3.Quantity 4.Shipment Date Overlap on Major Terms = Contract

14. “Dickered Terms” “Deal points”; negotiated terms The essence of the business transaction –Separate from “legalese” –P. 188

15. Backs of the Forms Confirmation 1.Limit on Warranty 2.Arbitration 3.Timely Delivery 4.Shipment: Risk of Loss 5.Etc. 6.Etc. 7.Etc.

16. Backs of the Forms Confirmation 1.Limit on Warranty 2.Arbitration 3.Timely Delivery 4.Shipment: Risk of Loss 5.Etc. 6.Etc. 7.Etc. 1.Extensive Warranty 2.Choice of Law 3.“Time is of the essence” – delivery clause 4.Indemnification 5.Etc. 6.Etc. 7.Etc. Purchase Order

17. “Degree of Overlap” – Fine Print

18. Sales Confirmation (Seller) 1.Goods 2.Price 3.Quantity 4.Shipment Date Purchase Order (Buyer) 1.Goods 2.Price 3.Quantity 4.Shipment Date Overlap on Major Terms = Contract

19. Stewart Macauley, Non- contractual Relations in Business The fine print is rarely consulted Disputes often worked out informally Norms of fairness, reciprocity, etc., often control

23. How to Handle this? UCC 2-207 to the rescue!

24. 2-207: Major Innovations No “mirror image rule” Separate “K” from “terms” -Overall K formation -K Terms K even though writings do not match up

25. 2-207(1) (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time [*A*] operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, [*B*] unless acceptance is expressly made conditional on assent to the additional or different terms.

26. [*A*] “operates as an acceptance” Here is where the “mirror image rule” dies

27. [*B*] “The proviso” Operates as an acceptance... unless acceptance is expressly made conditional on assent to the additional or different terms.  Proviso case: No acceptance; no K is formed

28. 2-207(3): K by conduct; no K “on the writings” (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this code.

29. 2-207(3): K by conduct; no K “on the writings” (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract.

30. 2-207(3): Takes effect in 2 cases 1. Failure of agreement on “major terms” 2. Offer includes “proviso” under 2- 207(1) which is not “assented to” –“Failed proviso” case

31. 207(1) 207(2) 207(3) 1.No agreement on major terms 2.Failed proviso case

32. 207(1) 207(2) 207(3) 1.Agreement on major terms; not a “failed proviso” case 2. Then: Go to 2-207(2)

33. Jordan Int’l [Steel] Co. C. Itoh Co. P. 199

34. 2-207(3): K by conduct; no K “on the writings” (3)... In such case the terms of the particular contract consist of [*a*] those terms on which the writings of the parties agree, [*b*] together with any supplementary terms incorporated under any other provisions of this code.

35. Sources of law: 2-207(3) Contracts Terms on which parties agree UCC Itself

36. 1.Price 2.Quantity Terms on which parties agree

37. 1.Price 2.Quantity “Gaps” in the K

38. 1.Price 2.Quantity Terms supplied by the UCC 2-309: Reasonable Delivery time 2-310: Payment: Cash at Delivery

39. 1.Price 2.Quantity UCC: “Gap- fillers” UCC

40. Consider only acceptances varying offers Avoid the disputes over “confirmations” Dorton v. Collins & Aikman may involve either confirmation or acceptance varying offer

41. The confirmation quagmire (1)A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance... (2) [Speaks only of offers...]

42. Applying 2-207: Dorton v. Collins & Aikman Facts History

45. Does 2-207 apply? Is this a “Proviso” case?

46. [*B*] “The proviso” Operates as an acceptance... unless acceptance is expressly made conditional on assent to the additional or different terms.  Proviso case: No acceptance; no K is formed

47. Holding: not a proviso case “expressly made conditional on assent”  p. 195-96: “Acceptance subject to all the terms and conditions on the face and reverse side hereof...” NOT ENOUGH

48. Then what? On to 2-207(2)

49. 207(1) 207(2) 207(3) 1.Agreement on major terms; not a “failed proviso” case 2.Go to 2-207(2)

50. What if there is a K on the writings? By definition, acceptance “states terms additional to or different from those offered or agreed upon.”

51. Different vs. additional terms Dorton involves “additional” term –Offer is silent re: arbitration

52. Confirmation 1.Limit on Warranty 1.Extensive Warranty Purchase Order Different Term in Acceptance

53. Confirmation 1.Limit on Warranty Purchase Order Additional Term in Acceptance

54. Confirmation 1.Arbitration Purchase Order Additional Term in Acceptance

55. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) The offer expressly limits acceptance to the terms of the offer; (b) They materially alter it; or (c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

56. 207(2): The Merchant’s Rule “Between merchants” – Takes 2 merchants! “[S]uch terms become part of the contract unless...” –Additional terms IN UNLESS --

57. 207(2): Exceptions to “Merchant’s Rule” (a) The offer expressly limits acceptance to the terms of the offer; (b) They materially alter it; or (c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

58. 207(2)(a): Offer says “my terms only” Exception to 2-207 merchant’s rule; additional term not in the K

59. 2-207(2)(b): Material alteration rule Non-material (“big’) alteration: additional term is in K Material K: it is not in the K

60. 2-207(2)(b): Material alteration rule Non-material (“small’) alteration: additional term is in K Material (big) term: it is NOT in the K –Remand in Dorton to figure this out...

61. Don’t get lost – Additional terms Merchants rule Material/non-material alteration

62. Confirmation 1.Limit on Warranty 1.Extensive Warranty Purchase Order Different Term in Acceptance

63. Northrop Corp. v. Litronic 3 Positions on “different terms” –Knockout rule –Fall out rule –“Treat like additional terms” rule - California

64. Minoriry rule Fallout rule: different term in acceptance FALLS OUT of K So offeror’s term stays in, and prevails

65. Confirmation 1.Limit on Warranty 1.Extensive Warranty Purchase Order Different Term in Acceptance

66. Knockout Rule Different terms “knock each other out,” both are removed from the K What is left? UCC gap-fillers

67. ConfirmationPurchase Order Different Term in Acceptance

68. 1.Price 2.Quantity UCC: “Gap- fillers” on warranties UCC